Existing law vests the Public Utilities Commission with regulatory authority over public utilities, including electrical corporations. Existing law authorizes the commission to fix the rates and charges for every public utility and requires that those rates and charges be just and reasonable.

This bill would require each electrical corporation to obtain the commissions approval for the terms of its retail transmission rates. rates, as specified.

This bill would authorize the commission to direct an electrical corporation with more than 100,000 service connections in California, when billing a large commercial or industrial customer for separately metered new load to provide industrial heat, to apply an adjustment factor to the per kilowatthour rate for each volumetrically determined surcharge on energy use to limit the surcharge ratio, as defined, to no more than 25% or an alternative maximum ratio determined by the commission to be just and reasonable and in furtherance of facilitating electrification of industrial energy use. The bill would prohibit an eligible industrial transition customer that pays a reduced surcharge from receiving an incentive funded by that surcharge in an amount that exceeds the amount of the surcharge paid by the eligible industrial transition customer. The bill would require the commission, on or before January 1, 2032, and every 5 years thereafter, to evaluate and report to the Legislature on the adjustment factor, as specified.

Under existing law, a violation of the Public Utilities Act or an order, decision, rule, direction, demand, or requirement of the commission is a crime.

Because the above provision would be part of the act and a violation of a commission action implementing that provision would be a crime, this bill would impose a state-mandated local program.

Existing law establishes the Independent System Operator as a nonprofit, public benefit corporation and requires the Independent System Operator, among other duties, to ensure the efficient use and reliable operation of the electrical transmission grid consistent with the achievement of planning and operating reserve criteria, as provided.

This bill would establish as a policy of the state that allocation of costs to ratepayers for transmission and distribution resources should follow cost causation principles. The bill would require the commission, on or before January 1, 2028, to request the Independent System Operator to reconsider issues raised in its transmission access charge structure enhancements proceeding as potential reforms to its high-voltage transmission access charges. The bill would require the commission to develop recommendations for changes to high voltage transmission access charges that would improve consistency with the commissions causation principles, and to submit the recommendations to the Independent System Operator within a proceeding considering changes to the high-voltage transmission access charge structure.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

Existing law vests the Public Utilities Commission with regulatory authority over public utilities, including electrical corporations. Existing law authorizes the commission to fix the rates and charges for every public utility and requires that those rates and charges be just and reasonable.

This bill would authorize the commission to direct an electrical corporation with more than 100,000 service connections in California, when billing a large commercial or industrial customer for separately metered new load to provide industrial process heat, to apply an adjustment factor to the per kilowatthour rate so as for each volumetrically determined surcharge on energy use to limit the nonbypassable charge surcharge ratio, as specified, defined, to no more than 25% or an alternative maximum ratio determined by the commission to be just and reasonable and in furtherance of facilitating electrification of industrial energy use.

Under existing law, a violation of the Public Utilities Act or an order, decision, rule, direction, demand, or requirement of the commission is a crime.

Because the above provision would be part of the act and a violation of a commission action implementing that provision would be a crime, this bill would impose a state-mandated local program.

Existing law establishes the Independent System Operator as a nonprofit, public benefit corporation and requires the Independent System Operator, among other duties, to ensure the efficient use and reliable operation of the electrical transmission grid consistent with the achievement of planning and operating reserve criteria, as provided.

This bill would establish as a policy of the state that allocation of costs to ratepayers for transmission and distribution resources should follow cost causation principles. The bill would require the commission, on or before January 1, 2028, to request the Independent System Operator to reconsider issues raised in its transmission access charge structure enhancements proceeding as potential reforms to its high-voltage transmission access charges. The bill would require the commission to develop recommendations for changes to high voltage transmission access charges that would improve consistency with the commissions causation principles, and to submit the recommendations to the Independent System Operator within a proceeding considering changes to the high-voltage transmission access charge structure.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

Existing law vests the Public Utilities Commission with regulatory authority over public utilities, including electrical corporations. Existing law authorizes the commission to fix the rates and charges for every public utility and requires that those rates and charges be just and reasonable.

This bill would authorize the commission to direct an electrical corporation with more than 100,000 service connections in California, when billing an a large commercial or industrial customer for separately metered new load to provide industrial process heat, to apply an adjustment factor to the per kilowatthour rate so as to limit the nonbypassable charge ratio, as specified, in furtherance of facilitating electrification of industrial energy use.

Under existing law, a violation of the Public Utilities Act or an order, decision, rule, direction, demand, or requirement of the commission is a crime.

Because the above provision would be part of the act and a violation of a commission action implementing that provision would be a crime, this bill would impose a state-mandated local program.

Existing law establishes the Independent System Operator as a nonprofit, public benefit corporation and requires the Independent System Operator, among other duties, to ensure the efficient use and reliable operation of the electrical transmission grid consistent with the achievement of planning and operating reserve criteria, as provided.

This bill would establish as a policy of the state that allocation of costs to ratepayers for transmission and distribution resources should follow cost causation principles. The bill would require the commission, on or before January 1, 2028, to request the Independent System Operator to reconsider issues raised in its transmission access charge structure enhancements proceeding as potential reforms to its high-voltage transmission access charges. The bill would require the commission to develop recommendations for changes to high voltage transmission access charges that would improve consistency with the commissions causation principles, and to communicate submit the recommendations to the Independent System Operator, and to request the Independent System Operator to reopen its transmission access charge structure enhancements proceeding to consider reforms to its Operator within a proceeding considering changes to the high-voltage transmission access charges. charge structure.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

Existing law vests the Public Utilities Commission with regulatory authority over public utilities, including electrical corporations. Existing law authorizes the commission to fix the rates and charges for every public utility and requires that those rates and charges be just and reasonable.

This bill would authorize the commission to direct an electrical corporation with more than 100,000 service connections in California, when billing an industrial customer for separately metered new load to provide industrial process heat, to apply an adjustment factor to the per kilowatthour rate so as to limit the nonbypassable charge ratio, as specified, in furtherance of facilitating electrification of industrial energy use.

Under existing law, a violation of the Public Utilities Act or an order, decision, rule, direction, demand, or requirement of the commission is a crime.

Because the above provision would be part of the act and a violation of a commission action implementing that provision would be a crime, this bill would impose a state-mandated local program.

Existing law establishes the Independent System Operator as a nonprofit, public benefit corporation and requires the Independent System Operator, among other duties, to ensure the efficient use and reliable operation of the electrical transmission grid consistent with the achievement of planning and operating reserve criteria, as provided.

This bill would establish as a policy of the state that allocation of costs to ratepayers for transmission and distribution resources should follow cost causation principles. The bill would require the commission, on or before January 1, 2028, to develop recommendations for changes to high voltage transmission access charges that would improve consistency with the commissions causation principles, to communicate the recommendations to the Independent System Operator, and to request the Independent System Operator to reopen its transmission access charge structure enhancements proceeding to consider reforms to its high-voltage transmission access charges.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

Date of Hearing: August 5, 2026

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Buffy Wicks, Chair

SBPCA Bill Id:SB 943

Author:(Becker) – As Amended Ver:June 15, 2026

Urgency: No State Mandated Local Program: Yes Reimbursable: No

SUMMARY:

This bill seeks to facilitate electrification of industrial uses of electricity by aligning surcharges on electricity usage by large commercial and industrial customers with periods of lower demand for electricity.

More specifically, this bill:

1. (a) Directs the California Public Utilities Commission (CPUC), by January 1, 2028, to request the California Independent System Operator (CAISO) to reconsider issues raised in CAISO’s transmission access charge (TAC) structure enhancement proceeding as potential reforms to CAISO’s high-voltage TAC structures and (b) requires the CPUC to develop recommendations for changes to high-voltage TACs that would improve consistency of those charges with the CPUC’s cost causation principle and to submit the recommendations to CAISO.
2. Authorizes the CPUC to direct each large electrical corporation (also referred to as an investor-owned utility (IOU)), when billing a large commercial or industrial customer with new electrical load on or after January 1, 2027, as specified, to apply an adjustment factor that caps the per-kilowatt rate for each volumetrically determined surcharge on electricity use so as to facilitate electrification of industrial energy use to improve air quality and reduce emission of greenhouse gases (GHGs).
3. Prohibits a large commercial or industrial customer that pays a reduced surcharge as a result of the cap described above from receiving an incentive funded by that surcharge in an amount that exceeds the amount of the surcharge paid by the customer.
4. Requires the CPUC, by January 1, 2032, and every five years thereafter, to evaluate and report to the Legislature receipt and effect of the cap.

FISCAL EFFECT:

This bill requires significant new work of the CPUC to develop recommendations for changes to high-voltage TACs. It also creates significant cost pressure on the CPUC to apply a cap to the per-kilowatt rate for each volumetrically determined surcharge on electricity use so as to facilitate electrification of large commercial and industrial energy use. Each activity will create costs, or cost pressure, in the hundreds of thousands of dollars (Public Utilities Commission Utilities Reimbursement Account (PUCURA)). If the CPUC does direct the IOUs to apply a cap on the per-kilowatt rate an IOU charges for each volumetrically determined surcharge on electricity use by large commercial and industrial customers, the CPUC will additionally face ongoing monitoring and reporting costs.

The CPUC estimates annual costs of $224,000 (PUCURA) for each of three years to fund one regulatory analyst, as well as $300,000 total over those three years, to both develop recommendations to CAISO and to consider a cap on the per-kilowatt rate paid by large commercial and industrial customers. The CPUC summarizes the analyst’s work as leading the CPUC's participation in CAISO's TAC structure enhancements proceeding, staffing the new or expanded ratesetting proceeding to evaluate and possibly implement a surcharge cap, and periodic reporting to the Legislature on the number of customers receiving the adjustment, cost impacts and ratepayer effects and describes the consulting funds as paying for ongoing data collection, establishment and reevaluation of surcharge/cap levels and assessment of the risk of resulting shift of costs to other customers.

COMMENTS:

1. Purpose. The author intends this bill to make large commercial and industrial uses of electricity cheaper, relative to uses of natural gas or other fossil fuels—generally though combustion to produce heat—thereby encouraging large commercial and industrial users to electrify their operations, which, the author contends, will reduce pollution and defray fixed electrical infrastructure costs. According to the author:

SB 943 will help industrial firms reduce air pollution and greenhouse gas emissions cost-effectively, keeping business and jobs in the state, while also reducing electricity rates for all utility customers – just by adopting some reforms to the way electricity is priced at off-peak times when California has abundant clean electricity…If we get this right, off-peak electricity can be cheap enough to help industry switch to clean energy, and because this is new electricity demand, every dollar paid above the marginal cost of service is new money to help pay for the fixed costs of the grid, which will lower rates for everyone else.

1. Background. Large commerical and industrial users of energy use a lot of heat to make and process goods and products. In most cases, this heat results from the combustion of natural gas or another fossil fuel, which releases GHGs and other air pollutants. In some cases, there are electrical alternatives to industrial combustion of gas. For example, industrial steam may be produced by an electric boiler. However, in many instances, industrial use of electricity is as expensive, or more so, than combustion of fossil fuels. This is true despite many utilities offering electric rates that vary by the time of day to better reflect the abundance of cheap, clean sources of electricity, such as solar panels generating electricity during the middle of a mild, sunny day.

Part of the reason the per-unit cost of electricity remains relatively high despite time-varying prices is that some components of the price of electricity do not, in fact, vary with time. For example, CPUC-electricity rates include what are known as “nonbypassable charges” (NBCs). NBCs fund a variety of public purpose programs, such as low-income customer bill subsidies. A customer is charged the same amount for an NBC on each kilowatt of electricity consumed, even if the cost, and price, of the underlying electricity varies to reflect marginal cost. Similarly, a customer pays for the use of the electric transmission system through a TAC on each kilowatt of electricity consumed, and the amount of the TAC, like NBCs, does not vary with the time of consumption.

This bill authorizes the CPUC to direct the IOUs to apply the cap on the per kilowatt-hour (kWh) rate for each volumetrically determined surcharge on energy use, such as NBCs, to limit the surcharge ratio to no more than 25% or an alternative maximum ratio determined by the CPUC to be just and reasonable and in furtherance of facilitating electrification of industrial energy use. The amount and incidence of NBCs are fully within the CPUC’s statutory authority over IOU rates, so the CPUC would be able exercise the power this bill gives to it, should it choose to do so.

The CPUC, however, may not adjust the TAC. This is because the TAC is governed by CAISO, which must abide by CAISO’s tariff (schedule of prices and associated rules) as approved by the Federal Energy Regulatory Commission. For this reason, the bill directs the CPUC merely to request that CAISO reconsider issues CAISO raised in its prior consideration of a time-varying TAC.

The bill is supported by many industrial energy users and environmental advocacy organizations. There is no registered opposition to the bill.

Analysis Prepared by: Jay Dickenson / APPR. / (916) 319-2081

Date of Hearing: June 10, 2026

ASSEMBLY COMMITTEE ON UTILITIES AND ENERGY

Cottie Petrie-Norris, Chair

SBPCA Bill Id:SB 943

Author:(Becker) – As Amended Ver:May 27, 2026

SENATE VOTE: 33-3

SUBJECT: Public utilities: electricity: retail transmission rates: industrial transition usage

SUMMARY: Authorizes changes to utility rates to support electrification of industrial heat by capping volumetric surcharges for large commercial or industrial customers with new load on or after January 1, 2027, including through thermal energy storage systems, and requires the California Public Utilities Commission (CPUC) to request California Independent System Operator (CAISO) to reconsider reforms to Transmission Access Charges (TAC). Specifically, this bill:

1. Authorizes the CPUC to direct an electrical corporation with more than 100,000 service connections in California, when billing a large commercial and industrial customer for separately metered new load to provide industrial heat, to apply an adjustment factor to the per kilowatt-hour (kWh) rate for each volumetrically determined surcharge on energy use to limit the surcharge ratio to no more than 25% or an alternative maximum ratio determined by the CPUC to be just and reasonable and in furtherance of facilitating electrification of industrial energy use.
2. States that it is the policy of the state that transmission and distribution cost allocation should follow cost-causation principles, including consideration of the differing impacts on costs caused by load occurring during the highest usage time periods relative to loads occurring during off-peak times.
3. Recognizes that CAISO determines the allocation of transmission costs in its high-voltage TAC pursuant to a tariff approved by the Federal Energy Regulatory Commission (FERC) and states the Legislature's intent that CAISO take notice of the state policies expressed in Section 351.
4. Requires the CPUC, on or before January 1, 2028, to request CAISO to reconsider the issues previously raised in its TAC-Structure Enhancements proceeding as potential reforms to high-voltage TAC.
5. Requires the CPUC to develop recommendations for changes to the high voltage TAC that would improve consistency with the CPUC’s cost-causation principles and to submit these recommendations to the CAISO within a proceeding considering changes to the high-voltage TAC structure.
6. Requires each electrical corporation to obtain CPUC approval for its retail transmission rates.
7. Defines:
8. Eligible industrial transition customer to mean a large commercial or industrial customer with new load on or after January 1, 2027, that is metered separately from previously existing loads and that consists solely of industrial transition usage.
9. Eligible industrial transition usage means using electricity to provide industrial heat, including through the use of thermal energy storage system, and may include de minimis consumption necessary for management and control of that usage.
10. Industrial heat to include any of the following:
11. Heat used directly as process heat in an industrial facility.
12. Heat used for a thermal energy network that provides heat from a central source to multiple buildings connected to the thermal energy network.
13. Heat used for both industrial heat and behind-the-meter cogeneration of electricity.
14. Surcharge ratio as the sum of all volumetrically determined surcharges on energy use for a billing period, including volumetrically determined nonbypassable charges (NBC’s), divided by the sum of all volumetric energy and delivery charges for a billing period.

EXISTING LAW

1. Establishes the FERC has exclusive jurisdiction over the transmission of electric energy in interstate commerce. Establishes the process and procedures for establishing transmission of electric energy in interstate commerce by public utilities, i.e., the rates, terms, and conditions of interstate electric transmission by public utilities, including requiring all rates and charges to be just and reasonable. (Federal Power Act §§ 201, 205, 206 (16 USC 824, 824d, 824e)
2. Vests the CPUC with regulatory authority over public utilities, including electrical corporations. Requires that rates and charges fixed by the CPUC be just and reasonable. (Public Utilities Code § 451)
3. Requires the CPUC to apply specific costs to each customer based on the amount of electricity purchased by the customer from an electrical corporation or alternate supplier of electricity, subject to changes in usage occurring in the normal course of business. (Public Utilities Code § 371(a))
4. Defines "change in usage" to generally mean changes occurring in the normal course of business resulting from changes in business cycles, termination of operations, departure from the utility service territory, weather, reduced production, modifications to production equipment or operations, changes in production or manufacturing processes. (Public Utilities Code § 371(b))
5. Prohibits NBCs or departing load surcharges, as defined by the CPUC, from applying to a reduction in kWhs of electricity that an electrical corporation customer consumes from the electrical grid in a metered interval due to industrial process heat recovery technology, up to a cap established by the CPUC. (Public Utilities Code § 451.7)
6. Requires the California Air Resources Board (CARB) to adopt a statewide greenhouse gas (GHG) emissions limit equivalent to 1990 levels by 2020, to ensure that statewide GHG emissions are reduced to at least 40% below the 2020 statewide limit no later than December 31, 2030, and to adopt rules and regulations to achieve maximum technologically feasible and cost-effective GHG emission reductions. Declares the policy of the state to achieve net-zero GHG emissions as soon as possible, but no later than 2045, and to achieve and maintain net negative GHG emissions thereafter. (Health and Safety Code § 38500 et seq.)
7. Establishes the CAISO as a nonprofit, public benefit corporation and requires it to ensure the efficient use and reliable operation of the electrical transmission grid. CAISO’s FERC-approved tariff governs the allocation of transmission costs through its high-voltage transmission access charges. (Public Utilities Code § 335)
8. Establishes the CAISO governing board with five members appointed for three-year terms by the Governor and subject to confirmation by the Senate. Requires the CAISO to ensure efficient use and reliable operation of the transmission grid consistent with achievement of planning and operating reserve criteria no less stringent than those established by the Western Electricity Coordinating Council (WECC) and the North American Electric Reliability Corporation (NERC). (Public Utilities Code §§ 337 and 345)
9. Defines “large electrical corporation” as an electrical corporation with more than 100,000 service connections in California. (Public Utilities Code § 2827)

FISCAL EFFECT: According to the Senate Committee on Appropriations, CPUC estimates ongoing costs of approximately $200,000 to $500,000 annually from ratepayer funds to implement this bill. This measure could also result in unknown costs to the State of California as an electricity customer, as the state purchases roughly 1% of California's electricity and could be affected by any resulting changes in electricity rates.

BACKGROUND

California’s Industrial Sector – California’s industrial sector includes a diverse range of facilities, including cement plants, metal processors, oil and gas producers, refineries, paper and glass manufacturers, mining operations, and food processors.^[1] According to CARB’s 2022 Scoping Plan, the industrial sector is the second-largest source of GHG emissions after transportation.^[2] Approximately, 80% of the industrial sector’s emissions come from combustion-related energy use, and the remaining emissions come from industrial processes and fugitive emissions. Combustion of fossil gas and fossil fuels provides energy to meet three broad industry needs: electricity, steam, and process heat. Industrial process heat is defined as heat energy (thermal energy) used for preparation or treatment of materials that produce manufactured goods. Process heat is reportedly the most significant source of energy use and GHGs in the industrial sector, accounting for about 50% of all onsite energy use and 30% of GHGs.^[3]

Industrial Electricity Bill – A large industrial electricity bill includes several charge categories:

• Energy and Delivery Charges: Costs for generating and delivering electricity, including transmission and distribution. These charges often vary by time of use (on-peak, mid-peak, and off-peak), season, and customer class.^[4]
• Nonbypassable Charges (NBCs): Per-kilowatt-hour charges that fund public purpose programs such as low-income bill reduction and energy efficiency programs, as well as stranded cost recovery, Department of Water Resources bond obligations, and wildfire-related costs. These charges apply to all electricity consumed regardless of timing.^[5] The amount a customer pays in NBCs generally increases with electricity consumption because the charges are assessed on a per-kilowatt-hour basis.
• Transmission Access Charges (TAC): FERC-jurisdictional charges associated with use of the transmission system operated under CAISO, allocated on a volumetric basis and generally not differentiated by time of use.^[6]
• Demand Charges: Charges based on a customer’s peak electricity demand during a billing period, measured in kilowatts (kW), reflecting the cost of maintaining grid infrastructure sized to meet peak demand conditions.^[7]

Transmission Cost Allocation – The costs of transmission are recovered primarily through CAISO’s TAC. CAISO was established under AB 1890 (Chapter 854, Statutes of 1996), which restructured California's electricity market and created an independent operator to manage the transmission grid and wholesale electricity markets. Before restructuring, transmission costs were generally recovered through bundled utility rates within each investor-owned utility’s service territory. After AB 1890, CAISO took over operation of most of the state’s transmission system, while utilities and other transmission owners continued to own the transmission facilities.

Transmission owners file their transmission revenue requirements with FERC for approval. Once approved, those costs are recovered through the TAC under CAISO’s tariff structure, and TAC rates change as FERC approves updates to transmission owner revenue requirements. The TAC applies broadly across the CAISO balancing authority area and spreads transmission costs across electricity customers based largely on electricity consumption. Transmission charges generally do not vary depending on when electricity is used, meaning customers pay the same transmission rate during both peak and off-peak periods. In 2015, CAISO launched its TAC Structure Enhancements initiative to consider potential modifications to the TAC structure. Through 2017 and 2018, CAISO evaluated whether transmission costs should continue to be recovered primarily through volumetric charges or whether a portion should instead be allocated based on peak demand. However, the proceeding ultimately concluded without changes to the TAC structure.

COMMENTS:

1. Author’s statement. According to the author, “SB 943 will help industrial firms reduce air pollution and greenhouse gas emissions cost-effectively, keeping business and jobs in the state, while also reducing electricity rates for all utility customers – just by adopting some reforms to the way electricity is priced at off-peak times when California has abundant clean electricity. The PUC is developing dynamic rates which will go a long way toward offering very low-cost electricity at off-peak times. However, there are a couple of problems outside of the PUC’s control that will prevent off-peak electricity from being cheap enough for industrial firms to shift to electricity for the heat they need to run their factories, and that is what this bill addresses. First, transmission charges on the CAISO grid are the same at all times, rather than higher during peak hours and lower off-peak, as is done almost everywhere else in the country. SB 943 requires the PUC to work with CAISO to reform transmission charges to encourage off-peak usage and clarifies the PUC’s authority to regulate retail transmission rates so that the PUC can ensure that utilities follow the directive they’ve already issued to offer time-varying transmission rates. Second, surcharges on energy usage – similar to a sales tax on electricity to pay for public purpose programs – are also set as flat rates. For most customers, those are about 10-15% of the cost of electricity, but they could be more than 100% of the cost of off-peak electricity under dynamic rates. SB 943 authorizes the PUC to cap surcharges at 25% of the cost of electricity – just for new demand for industrial heat -- so that these extra costs don’t double rates and prevent off-peak electricity from being cost-effective. If we get this right, off-peak electricity can be cheap enough to help industry switch to clean energy, and because this is new electricity demand, every dollar paid above the marginal cost of service is new money to help pay for the fixed costs of the grid, which will lower rates for everyone else.”
2. Why this Bill? SB 943 seeks to address electricity costs that can make electricity less competitive than natural gas for industrial heat applications (i.e., the use of heat in manufacturing and processing operations). In 2023, the industrial sector was the state's second-largest source of GHGs after transportation ^[8] Many industrial facilities use natural gas to produce industrial heat, including steam used for food processing, metal production, and chemical manufacturing. For some industrial applications, heat can be supplied through technologies such as industrial heat pumps, electric boilers, electric arc furnaces, and thermal energy storage systems instead of fossil fuel combustion. However, facilities considering electrification of industrial heat applications often face electricity costs that are higher than natural gas costs, even during periods when wholesale electricity prices are low.

While wholesale electricity prices vary by time, location, and system conditions, transmission charges and volumetrically determined surcharges can substantially increase the delivered cost of electricity, offsetting the benefit of lower off-peak wholesale prices. In 2025, the CPUC adopted guidelines for dynamic pricing tariffs and directed utilities to develop proposals that would allow electricity prices to vary based on wholesale market prices, but the author states that transmission charges and volumetric surcharges continue to limit the competitiveness of electricity relative to natural gas for industrial heat applications.

The author also contends that uncertainty regarding the CPUC's authority over retail transmission rate design could limit the CPUC's ability to require time-varying transmission rates.

Therefore, SB 943 would:

1. Authorize the CPUC to cap volumetric surcharges for large commercial and industrial customers electrifying industrial heat applications at 25% of the total electricity cost, or an alternative percentage the CPUC determines to be just and reasonable.
2. Direct the CPUC to develop recommendations for reforming high-voltage TAC to better reflect cost-causation principles, which provides that customers who drive peak demand bear more of the costs of the transmission system, and to request that CAISO reconsider the issues raised in its prior TAC structure enhancements proceedings.
3. Require each IOU to obtain CPUC approval of its retail transmission rates. According to the author, this provision would clarify the CPUC's authority over retail transmission rates so that time-varying pricing signals may be reflected in retail rates, particularly to incentivize off-peak electricity consumption.

According to the author, these changes could help accelerate industrial decarbonization while keeping electricity costs competitive and supporting the retention and expansion of industrial facilities and jobs in California.

1. Who Receives the Benefit? California's electricity rates include a variety of volumetrically determined surcharges, including NBCs, that are collected on a per-kilowatt-hour basis from electricity customers. Many of these charges originated during California's electricity restructuring in the late 1990s to ensure recovery of certain electricity-related costs as California transitioned to a more competitive electricity market. Over time, additional charges were adopted to recover the costs of programs and obligations established through state law and CPUC decisions, including energy efficiency programs, low-income assistance programs such as CARE, renewable energy programs, and certain above-market electricity procurement costs. Because these charges are generally assessed on electricity consumption, they continue to apply even during periods when electricity prices are low.

SB 943 would authorize the CPUC to apply an adjustment factor to certain volumetrically determined surcharges for eligible industrial heat electrification load. The bill is based on the premise that, when electricity prices are low, these surcharges can make up a larger portion of a customer's electricity bill and reduce the potential savings from switching industrial process heat from natural gas to electricity. By reducing surcharge obligations for separately metered new load used to provide industrial heat, the bill would create an exception to charges that are otherwise broadly applied to electricity consumption, limiting the benefit to a specific category of industrial electricity use.

1. Revisiting the TAC Debate. In addition to modifying volumetric surcharges, SB 943 also seeks changes related to transmission cost allocation. The bill would require the CPUC to request that CAISO reconsider issues examined in its TAC Structure Enhancements initiative and develop recommendations for TAC reforms that better reflect cost-causation principles. CAISO examined potential TAC reforms through its TAC Structure Enhancements initiative in 2017 and 2018.^[9],[10] The initiative examined whether transmission costs should continue to be recovered through volumetric charges or whether a portion of those costs should instead be allocated based on a customer's electricity usage during periods of peak system demand (coincident peak demand). Stakeholders differed on these approaches and the extent to which they would better align transmission cost recovery with use of the transmission system. Although CAISO issued a draft final proposal in 2018, the proposal was not implemented, and the initiative was subsequently placed on hold.

SB 943 would require the CPUC to request that CAISO reconsider the TAC reforms examined during the 2017-2018 TAC Structure Enhancements initiative. According to the author, California's electrification goals and efforts to encourage electricity consumption during lower-cost periods warrant revisiting whether transmission charges should better reflect differences in when electricity is used. The bill would revisit an issue that CAISO previously examined but did not ultimately pursue. While California's electricity system and policy objectives have evolved since that time, it is unclear whether those changes would lead CAISO to reach a different conclusion. To clarify, the bill would require the CPUC to request that CAISO revisit the issue, but it would not require CAISO to reopen the initiative nor to adopt any reforms. Any changes to the TAC structure would still require action by CAISO and approval by FERC.

1. Transmission Rate Authority. SB 943 requires each electrical corporation to obtain CPUC approval for its retail transmission rates. According to the author, this is intended to affirm the CPUC's authority over retail transmission rates because price incentives associated with time-varying transmission rates are reflected in retail transmission rates. The author references a 2025 FERC order which states that while wholesale transmission rates are subject to federal jurisdiction, states retain authority over how those costs are allocated to customer classes and reflected in retail rate structures.^[11]As such, the committee recommends clarifying amendments stating that the provision does not grant the CPUC authority to determine or disallow FERC-approved wholesale transmission rates. Rather, it affirms the CPUC's authority to determine how those federally approved transmission costs are allocated among retail ratepayers.
2. You Pay Less, You Get Less. This bill authorizes the CPUC to limit certain volumetrically determined surcharges for separately metered new industrial heat load by applying an adjustment factor, subject to a maximum surcharge ratio of 25% or another ratio the CPUC determines to be just and reasonable. Because customers receiving reduced surcharges would contribute less toward the programs funded by those surcharges, it is unclear to what extent those customers should remain eligible for benefits funded by the same surcharges they do not financially support. For this reason, the committee recommends that an eligible industrial transition customer receiving reduced surcharges remain eligible for incentives funded by those surcharges only to the extent of the customer's actual surcharge contributions.
3. Reporting Requirement. The bill authorizes the CPUC to apply an adjustment factor to certain volumetrically determined surcharges for eligible industrial transition customers. The adjustment factor is intended to reduce electricity costs for participating customers and support industrial electrification but could have cost implications for other ratepayers. Information regarding customer participation and resulting cost impacts would help the Legislature assess how the adjustment factor is being implemented and its impacts on participating customers and non-participating customers. Therefore, the committee includes a reporting requirement directing the CPUC to evaluate and report to the Legislature on the implementation of the adjustment factor, including the number of participating customers, the impact on electricity costs for eligible industrial transition customers, and any ratepayer impacts attributable to the adjustment factor.
4. Technical Amendments. The committee recommends technical amendments to provisions of the bill that may benefit from additional clarification.
5. Related Legislation.

AB 2182 (Irwin) requires each large electrical corporation, as defined, on or before August 1, 2027, to file a Tier 2 advice letter with the CPUC establishing an Industrial Decarbonization and Energy Efficiency Program with funding from energy efficiency charges collected from industrial or manufacturing facilities that meet specified requirements. Status: Pending hearing - Senate Committee on Energy, Utilities and Communications.

1. Prior Legislation.

SB 596 (Becker) required CARB to develop a strategy for achieving net-zero greenhouse gas emissions from the state's cement sector by 2045 and establish interim greenhouse gas intensity reduction targets, including a goal of reducing cement greenhouse gas intensity 40 percent below 2019 levels by 2035. Status: Chapter 246, Statutes of 2021.

AB 2109 (Carrillo) defined industrial process heat recovery as energy efficiency and exempted IPHR-driven reductions in electricity consumption from nonbypassable and departing load charges. Status: Chapter 700, Statutes of 2024.

AB 841 (Berman, 2023) would have required the CEC to create a roadmap for electrifying certain industrial processes, including high-heat processes. Status: Held in Senate Appropriations Committee.

SB 993 (Becker) would have required the CPUC to evaluate and, if just and reasonable, establish a clean energy development incentive rate tariff for new or expanded commercial and industrial electric loads that support greenhouse gas reductions, including hydrogen production and industrial process heat applications. Status: Held in Senate Appropriations Committee.

AB 209 (Committee on Budget, 2021) established the INDIGO program at CEC to fund industrial projects increasing energy efficiency and deploying decarbonization technologies. Chapter 251, Statutes of 2021.

SB 596 (Becker) required CARB to establish interim GHG intensity targets for cement, with a goal of 40 percent reduction by 2035. Status: Chapter 246, Statutes of 2021.

SB 32 (Pavley) required CARB to ensure statewide GHG emissions are reduced to 40 percent below 1990 levels by 2030. Status: Chapter 249, Statutes of 2016.

AB 32 (Nuñez) designated CARB as the state agency responsible for monitoring and regulating GHG sources. Status: Chapter 488, Statutes of 2006.

REGISTERED SUPPORT / OPPOSITION:

Support

350 Humboldt
Amy's Kitchen
Antora Energy, INC.
Asian Pacific Environmental Network
Bellwether Coffee
Bluegreen Alliance
Brightline Defense
California Large Energy Consumers Association
California Solar & Storage Association
Carbon Free Silicon Valley
Center for Community Action & Environmental Justice
Central Coast Alliance United for a Sustainable Economy
Clean Earth 4 Kids
Climate Action California
Climate Action California (UNREG)
Climate Action Campaign
Climate Action Campaign At the Humboldt Uu Fellowship
Climate Reality Project, Orange County Chapter
Democrats of Greater Irvine
Fresnans Against Fracking
Industrious Labs
Long Beach Alliance for Clean Energy
Long Duration Energy Storage Council
Menlo Spark
Natural Resources Defense Council
Natural Resources Defense Council (NRDC)
Net-zero California
Project 2030
Project Green Home
Redeemer Community Partnership
Renewable Thermal Collaborative (RTC)
Rondo Energy
Rondo Energy, INC.
Sandiego350
Santa Cruz Climate Action Network
Sierra Club California
Sierra Nevada Brewing Company
Silicon Valley Youth Climate Action
Skyven Technologies
St. George Spiritis
State Water Contractors
Sunflower Alliance
The 2035 Initiative At UC Santa Barbara
The Climate Reality Project Los Angeles Chapter
The Climate Reality Project Orange County Chapter
The Climate Reality Project San Diego Chapter
The Climate Reality Project, Sacramento Chapter
The Climate Reality Project, San Fernando Valley CA Chapter
Usgbc California
Women for American Values and Ethics (WAVE)

Opposition

None on file.

Analysis Prepared by: Lina V. Malova / U. & E. / (916) 319-2083

1. Pg.165, CARB, “DRAFT 2022 SCOPING PLAN UPDATE,” MAY 10, 2022 ↑

2. Pg.30, CARB; “California Greenhouse Gas Emissions for 2000 to 2020 Trends of Emissions and Other Indicators; https://ww2.arb.ca.gov/ghg-inventory-data ↑

3. Office of ENERGY EFFICIENCY & RENEWABLE ENERGY, “Process Heat Basics.” https://www.energy.gov/eere/iedo/process-heat-basics ↑

4. CPUC, Electric Rates and Tariffs Overview (including CARE, ESA, and Nonbypassable Charges)
   https://www.cpuc.ca.gov/industries-and-topics/electrical-energy/electric-rates ↑

5. Ibid ↑

6. CAISO, Transmission Access Charge (TAC); https://www.caiso.com/Pages/TransmissionAccessCharge.aspx ↑

7. PG&E, Commercial and Industrial Rate Plans and Demand Charges
   https://www.pge.com/en/account/rate-plans/rate-plans.html ↑

8. California Air Resources Board, California Greenhouse Gas Emissions from 2000 to 2023: Trends of Emissions and Other Indicators (Nov. 2025), p. 12; CARB Greenhouse Gas Inventory Data ↑

9. California Independent System Operator, Transmission Access Charge Structure Enhancements: Draft Final Proposal, September 17, 2018; https://www.caiso.com/Documents/DraftFinalProposal-TransmissionAccessChargeStructureEnhancements.pdf. ↑

10. California Independent System Operator, Transmission Access Charge Structure Enhancements, stakeholder initiative page; https://stakeholdercenter.caiso.com/StakeholderInitiatives/Transmission-access-charge-structure-enhancements. ↑

11. 190 FERC 61,115, Order Instituting Proceeding Under Section 206 of the Federal Power Act and Consolidating with Other Proceedings, FERC Docket Nos. EL25-49-000, AD24-11-000, EL25-20-000 (Consolidated), (February 20, 2025) at p.36. (referencing Nantahala Power & Light Co. v. Thornburg, 476 U.S. 953, 966 (1986)) ↑

 THIRD READING  

Bill No: SB 943

Author: Becker (D), et al.

Amended: 3/23/26

Vote: 21

SENATE ENERGY, U. & C. COMMITTEE: 15-0, 3/17/26

AYES: Allen, Ochoa Bogh, Archuleta, Arreguín, Becker, Dahle, Gonzalez, Hurtado, McNerney, Reyes, Richardson, Rubio, Stern, Strickland, Wahab

NO VOTE RECORDED: Caballero, Grove

SENATE APPROPRIATIONS COMMITTEE: 5-0, 5/14/26

AYES: Cervantes, Cabaldon, Grayson, Richardson, Wahab

NO VOTE RECORDED: Seyarto, Dahle

SUBJECT: Public utilities: electricity: transmission charge: industrial transition usage

SOURCE: Author

DIGEST:

This bill proposes two main policies authorizing changes in utility costs to encourage electrification of industrial process heat which would otherwise use fossil fuels, specifically: (1) request for changes to transmission access charges (TAC); and (2) adjustments to nonbypassable charges for new load that electrifies industrial process heat.

ANALYSIS:

Existing law:

1. Establishes the U.S. Federal Energy Regulatory Commission (FERC) has exclusive jurisdiction over the transmission of electric energy in interstate commerce. Establishes the process and procedures for establishing transmission of electric energy in interstate commerce by public utilities, i.e., the rates, terms, and conditions of interstate electric transmission by public utilities, including requiring all rates and charges to be just and reasonable. (Federal Power Act §§§201, 205, 206) (Title 16 United States Code (U.S.C.) 824, 824d, 824e)
2. Establishes and vests the California Public Utilities Commission (CPUC) with regulatory authority over public utilities, including electrical corporations. (Article XII of the California Constitution)
3. Requires the California Air Resources Board (CARB) to adopt a statewide greenhouse gas (GHG) emissions limit equivalent to 1990 levels by 2020, to ensure that statewide GHG emissions are reduced to at least 40% below the 2020 statewide limit no later than December 31, 2030, and to adopt rules and regulations to achieve maximum technologically feasible and cost-effective GHG emission reductions. Declares the policy of the state to achieve net zero GHG emissions as soon as possible, but no later than 2045, and to achieve and maintain net negative GHG emissions thereafter. (Health and Safety Code §38500 et seq.)
4. Establishes the California Independent System Operator (CAISO) governing board with five members appointed for three-year terms by the Governor and subject to confirmation by the Senate. Requires the CAISO to ensure efficient use and reliable operation of the transmission grid consistent with achievement of planning and operating reserve criteria no less stringent than those established by the Western Electricity Coordinating Council (WECC) and the North American Electric Reliability Corporation (NERC). (Public Utilities Code (PUC) §§337 and 345)
5. Requires all charges demanded or received by any public utility, or by any two or more public utilities, for any product or commodity furnished or to be furnished or any service rendered or to be rendered shall be just and reasonable. Every unjust or unreasonable charge demanded or received for such product or commodity or service is unlawful. (PUC §451)
6. Prohibits nonbypassable or departing load surcharges, as defined by the CPUC, from applying to a reduction in kilowatt-hours (kWh) of electricity that an electrical corporation customer consumes from the electrical grid in a metered interval due to industrial process heat recovery technology, up to a cap established by the CPUC. (PUC §451.7)
7. Requires the California Energy Commission (CEC) to establish the Industrial Decarbonization and Improvement of Grid Operations program to provide incentives for projects at industrial facilities that help achieve specified goals. (Public Resources Code §25662 et seq.)

This bill:

1. Makes several findings and declarations about the need to reduce GHGs, including from industrial sources, while minimizing leakage of industries leaving the state.
2. Authorizes the CPUC to direct an electrical corporation with more than 100,000 service connections in California, when billing a large commercial and industrial customer for separately metered new load to provide industrial process heat, to apply an adjustment factor to the per kWh rate to limit the nonbypassable charge ratio in furtherance of facilitating electrification of industrial energy use.
3. Establishes as a policy of the state that allocation of costs to ratepayers for transmission and distribution resources should follow cost causation principles.
4. Requires the CPUC, on or before January 1, 2028, to request the CAISO to reconsider issues raised in its TAC structure enhancement proceeding.
5. Requires the CPUC to develop recommendations for changes to high voltage TAC that would improve consistency with the CPUC’s causation principles and to submit the recommendations to the CAISO within a proceeding considering changes to the high-voltage TAC structure.

Background

Industrial sector. California’s industrial sector includes a diverse range of facilities, including cement plants, refineries, glass manufacturers, oil and gas producers, paper manufacturers, mining operations, metal processors, and food processors. According to the CEC’s 2023 Integrated Energy Policy Report, combustion of fossil gas, other gaseous fossil fuels, and solid fossil fuels provide energy to meet three broad industry needs: electricity, steam, and process heat. According to the CARB’s 2022 Scoping Plan, industrial processes account for roughly 23% of statewide emissions of GHG in 2020 and are the second-largest contributor of GHG emissions in the state, behind transportation. Refineries and hydrogen production represent the largest sources in the industrial sector. Cement production accounts for about two percent of in-state GHG emissions, more than half of those emissions are related to cement production processes and less than half are from fuel and electricity consumption.^[1]

Industrial process heat. Industrial process heat is defined as heat energy (thermal energy) used for preparation or treatment of materials that produce manufactured goods. Process heat is reportedly the most significant source of energy use and GHGs in the industrial sector, accounting for about 50% of all onsite energy use and 30% of GHG emissions, according to the 2018 Manufacturing Energy and Carbon Footprint analysis. According to the U.S. Department of Energy’s Office of Energy Efficiency and Renewable Energy (DOE OEERE), process heating systems are emission-intensive because fossil fuel combustion provides 95% of industrial heat across the manufacturing sector.

Electrification of industrial process heat. Electrification and solar thermal heat are best suited to industrial processes that have relatively low heat requirements, such as food processors, paper mills, and industries that use low-pressure steam in their processes. Approaches could include replacing fossil gas boilers with electric boilers, process heaters with industrial electric heat pumps, steel forging furnaces with induction heaters, and implementing other sector-specific processes.

Under current rate structures for industrial electricity and fossil gas in California, most projects to electrify a fossil gas-powered industrial process will face operating cost barriers and potential reliability concerns. There are fewer commercially available and economically viable electrification options to

replace industrial processes that require higher-temperature heat. For these processes, onsite combustion may continue to be needed, and decarbonization will require fuel substitutions to hydrogen or other low-carbon fuels. Fuel substitution and continued combustion will require monitoring and mitigation of any potential air quality impacts, especially in low-income and communities of color which already face disproportionate air pollution burdens. Industries in California with high heat needs include steel forging, glass manufacturing, and industries with calcination processes, such as manufacturing lime and cement.

Nonbypassable charges. The CPUC authorizes the electric investor-owned utilities (IOUs) to recover many of their costs through surcharges on each unit of electricity used by their customers. The CPUC, and in some cases statute, makes many of these charges nonbypassable, which means a customer must continue to pay the surcharges on each unit of electricity the customer consumes. Nonbypassable charges are assessed on a per kWh of usage basis, and as such, customers who use large amounts of electricity pay more in nonbypassable charges. Generally, nonbypassable charges represent the obligations of all the utility’s customers, regardless of the amount of electricity the utility supplies to any given customer. All utility customers pay the charges including customers of electrical corporations served by other load-serving entities (LSEs) such as Community Choice Aggregators (CCA).

Examples of nonbypassable charges. Nonbypassable charges are mandated volumetric customer surcharges assessed on each kWh of electricity used by the customer in order to help fund a variety of purposes and programs. For example, these charges fund public purpose programs (such as low-income rate assistance, energy efficiency procurement, biomass procurement mandates, and research and development). Other nonbypassable surcharges have been authorized to address specific purposes, including stranded investments during the electricity deregulation of the late 1990s, procurement costs incurred by the Department of Water Resources on behalf of electrical corporation customers during the Electricity Crisis of 2000-2001, and to fulfill ratepayers’ portion of payments into the Wildfire Fund to settle claims related to certain wildfires. Additional charges assessed by electric utilities are not considered nonbypassable charges, and may be assessed depending on the customer tariff, such as demand charges, standby, and other charges.

Transmission access charges (TAC). TACs are those rates recovered under a FERC approved tariff by the CAISO on each megawatt hour of load and exports to recover transmission revenue requirements from participating LSEs within the CAISO balancing authority – including IOUs, CCAs, electric service providers), some publicly owned utilities, and other entities, including the Bay Area Rapid Transit System (BART). In 2015, CAISO launched an initiative to consider options of potential modifications to the TAC structure. In 2018, CAISO proposed changes to the TAC that consisted in a hybrid approach that would utilize both peak demand and volumetric measurements of customer use to assess TAC charges. The CAISO stated that preserving a volumetric approach preserved cost-causation principle. However, the proposal also acknowledged that a volumetric-only approach is indifferent to when consumption occurs, which may not accurately reflect cost-causation, and the benefits users of the transmission receive from the transmission system. Many stakeholders commented on the proceeding, with mixed perspectives about the proposed changes, depending on how the proposal would affect their transmission rates. Ultimately, CAISO declined to adopt changes, perhaps due to other priorities for the entity, including expansion of the day-ahead market. Since then, there have been attempts to reconsider changes to the TAC which the CAISO has declined. Earlier this year, the Department of Water Resources, along with the State Water Contractors and other parties, submitted a request to the CAISO to once again reconsider the approach to changes to the TAC.

Comments

Need for this bill. According to the author:

SB 943 will help industrial firms reduce air pollution and greenhouse gas emissions cost-effectively, keeping business and jobs in the state, while also reducing electricity rates for all utility customers – just by adopting some reforms to the way electricity is priced at off-peak times when California has abundant clean electricity. …there are 2 other charges that will prevent off-peak electricity from being cheap enough for industrial firms to shift to electricity for the heat they need to run their factories. That is what this bill addresses. First, transmission charges on the CAISO grid are the same at all times, rather than higher during peaks hours and lower off-peak, as is done almost everywhere else in the country. SB 943 requires the PUC to work with CAISO to reform transmission charges to encourage off-peak usage. Second, nonbypassable charges – similar to a sales tax on electricity to pay for public purpose programs – is also set as a flat rate. For most customers it is about 10-15% of the cost of electricity, but it could be more than 100% of the cost of off-peak electricity under dynamic rates. SB 943 authorizes the PUC to cap nonbypassable charges at 25% of the cost of electricity – just for new demand for industrial heat -- so that these extra costs don’t double rates and prevent off-peak electricity from being cost-effective. Finally, because this is new electricity demand, every dollar paid, above the marginal cost of service, is new money to help pay for the fixed costs of the grid, which will lower rates for everyone else.

Electrification of industrial heat processes. Manufacturing processes are often large volume users who plan for every unit of fuel. Efforts to shift industrial heat processes to electricity are often challenged due to the comparative costs of the fuel needed in the manufacturing processes, often a comparison of the price of natural gas vs. electricity. With growing electricity rates in recent years, particularly driven by investments in wildfire mitigation by electrical corporations, among other factors, the higher cost of electricity compared to natural gas makes it unattractive to manufacturers to make this transition. Currently, the CPUC has been implementing dynamic, time-varying rates that better reflect real time prices on the grid. The CPUC is also requiring electrical corporations to incorporate cost-causation principles, including limiting certain charges to only recover those that are customer-specific non-peak distribution costs caused by the customer. This bill proposes extending these efforts to other charges to further attract industrial manufacturing processes from fossil fuels to electricity, specifically: transmission charges overseen by CAISO and nonbypassable charges collected from all distribution customers.

Requiring CPUC to request changes to the TAC. This bill requires the CPUC to request the CAISO make changes to the TAC to improve consistency with cost causation principles. The cost causation principle is a utility rate-making principle that generally holds that the users responsible for causing specific costs should bear those costs. The principle is intended to eliminate cross-subsidies among customers. Cost causation is one of several rate-making principles that inform utility ratemaking by the CPUC and FERC. Other principles include that rates should be based on the marginal cost (or the additional expense to produce one extra unit of service), rates should encourage economically efficient use of energy and reduction of GHGs, rates should improve system reliability, and others. The author’s and proponents’ desire to recommend cost causation principles to TAC is intended to better reflect transmission system usage by the load’s peak demand, to encourage more efficient use of the transmission system. Peak demand is often a driving cost of the transmission system buildout. This bill requires the CPUC to request these changes to the CAISO who develops the TAC which is ultimately approved by FERC.

Adjustments to nonbypassable charges. This bill authorizes, but does not require, the CPUC to direct electrical corporations to adjust the ratio of nonbypassable charges collected from new electric industrial heat process load. This bill provides the CPUC with the authority to make changes, including suggesting an adjustment that would result in up to 25% of the nonbypassable charges that would otherwise be collected from this load. Adjustments to nonbypassable charges would necessarily result in less collection for programs funded through these charges, including public purpose programs and the Wildfire Fund. However, the proponents contend this is electric load that would likely otherwise not come online due to the cost difference between fossil fuel (largely natural gas) and electricity to operate industrial manufacturing processes. They suggest this additional electric load reduces overall costs for customers, including for nonbypassable charges collected, particularly as this bill requires the marginal cost of providing service to be covered. Importantly, this bill provides the CPUC with discretion to adjust this amount to any amount determined to be just and reasonable, thereby not limiting the adjustment to a specific amount in the statute, though the inclusion of the 25% would necessarily support intervenors push for this amount within the CPUC proceeding. As this bill proceeds, the author may wish to ensure whether additional adjustments are needed in the statutes to allow for the proposed changes, as some nonbypassable charges are prescribed in existing statutes. Whereas proposals to collect different amounts of nonbypassable charges among electric customers are often disputed by stakeholders, the discretion afforded to the CPUC in this bill to ensure just and reasonable nonbypassable charges are still collected from this new load is possibly a reason stakeholders have not opposed this bill.

Related/Prior Legislation

See policy committee analysis.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: Yes

According to the Senate Appropriations Committee:

• The California Public Utilities Commission (CPUC) estimates ongoing costs of approximately $200,000 to $500,000 annually (ratepayer funds) for two positions to evaluate, develop, and implement a potential tariff adjustment framework for eligible industrial transition usage, including cost-allocation analysis, rate design, utility implementation review, stakeholder engagement, and ongoing oversight.
• Unknown fiscal impact to the state as an electrical utility ratepayer. The State of California is an electric customer, purchasing roughly one percent of the state’s electricity. As such, the state incurs costs if electricity rates. See staff comments for additional details on potential rate impacts.

SUPPORT: (Verified 5/14/26)

350 Humboldt
Amy's Kitchen
Antora Energy, Inc.
Asian Pacific Environmental Network
Brightline Defense

California Large Energy Consumers Association
California Solar and Storage Association

Carbon Free Silicon Valley

Central Coast Alliance United for a Sustainable Economy

Center for Community Action & Environmental Justice
Clean Coalition
CleanEarth4Kids.Org
Climate Action California
Climate Action Campaign
Climate Action Campaign at Humboldt UU Fellowship

Climate Resolve

Democrats of Greater Irvine

Environmental Defense Fund

Fresnans Against Fracking
Industrious Labs
Long Beach Alliance for Clean Energy

Long Duration Energy Storage Council

Menlo Spark
Natural Resources Defense Council
Net-Zero California
Project 2030
Project Green Home
Redeemer Community Partnership
Renewable Thermal Collaborative
Rondo Energy, Inc.
SanDiego350

Santa Cruz Climate Action Network
Sierra Club California
Sierra Nevada Brewing Company
Silicon Valley Youth Climate Action
St. George Spirits
State Water Contractors
Sunflower Alliance

The 2035 Initiative at UC Santa Barbara

The Climate Reality Project: Orange County

Women for American Values and Ethics

OPPOSITION: (Verified 5/14/26)

None received

ARGUMENTS IN SUPPORT: A coalition of manufacturers with operations in California, including Sierra Nevada Brewing Company, Amy’s Kitchen, Antorra Energy, Rondo Energy, and St. George Spirits, states:

With technologies like thermal storage and industrial heat pumps are commercially available today to modernize our facilities with clean heat technologies, the current industrial electricity rate structure stands in the way. Unfortunately, the CPUC is statutorily limited from making changes to how these charges [TAC and NBCs] are assessed. …SB 943 gives the CPUC the authority it needs to make that possible, unlocking a real path off fossil fuels for California manufacturers while keeping jobs in California.

Prepared by: Nidia Bautista / E., U. & C. / (916) 651-4107

5/16/26 9:55:37

**** END ****

1. https://ww2.arb.ca.gov/ghg-inventory-data ↑

SENATE COMMITTEE ON

Senator Sabrina Cervantes, Chair

2025 - 2026 Regular Session

SB 943 (Becker) - Public utilities: electricity: transmission charge: industrial transition usage

Bill Summary:

This bill would enact two main policies intended to encourage electrification of large industrial process heat by authorizing changes in utility costs, specifically: (1) reconsideration of changes to transmission access charges (TAC); and (2) adjustments to nonbypassable charges for new load that electrifies industrial process heat.

Fiscal Impact:

• The California Public Utilities Commission (CPUC) estimates ongoing costs of approximately $200,000 to $500,000 annually (ratepayer funds) for two positions to evaluate, develop, and implement a potential tariff adjustment framework for eligible industrial transition usage, including cost-allocation analysis, rate design, utility implementation review, stakeholder engagement, and ongoing oversight.
• Unknown fiscal impact to the state as an electrical utility ratepayer. The State of California is an electric customer, purchasing roughly one percent of the state’s electricity. As such, the state incurs costs if electricity rates. See staff comments for additional details on potential rate impacts.

Background:

Industrial process heat is defined as heat energy (thermal energy) used for preparation or treatment of materials that produce manufactured goods. Process heat is reportedly the most significant source of energy use and GHGs in the industrial sector, accounting for about 50% of all onsite energy use and 30% of GHG emissions, according to the 2018 Manufacturing Energy and Carbon Footprint analysis. According to the U.S. Department of Energy’s Office of Energy Efficiency and Renewable Energy (DOE OEERE), process heating systems are emission-intensive because fossil fuel combustion provides 95% of industrial heat across the manufacturing sector.

Electrification and solar thermal heat are best suited to industrial processes that have relatively low heat requirements, such as food processors, paper mills, and industries that use low-pressure steam in their processes. Approaches could include replacing fossil gas boilers with electric boilers, process heaters with industrial electric heat pumps, steel forging furnaces with induction heaters, and implementing other sector-specific processes.

Under current rate structures for industrial electricity and fossil gas in California, most projects to electrify a fossil gas-powered industrial process will face operating cost barriers and potential reliability concerns. There are fewer commercially available and economically viable electrification options to replace industrial processes that require higher-temperature heat. For these processes, onsite combustion may continue to be needed, and decarbonization will require fuel substitutions to hydrogen or other low-carbon fuels. Fuel substitution and continued combustion will require monitoring and mitigation of any potential air quality impacts, especially in low-income and communities of color which already face disproportionate air pollution burdens. Industries in California with high heat needs include steel forging, glass manufacturing, and industries with calcination processes, such as manufacturing lime and cement.

Nonbypassable charges. The CPUC authorizes the electric utilities under its ratemaking jurisdiction to recover many of their costs through surcharges on each unit of electricity used by their customers. The CPUC, and in some cases statute, makes many of these charges nonbypassable, which means a customer must continue to pay the surcharges on each unit of electricity the customer consumes. Nonbypassable charges are assessed on a per kWh of usage basis, as such, customers who use large amounts of electricity pay more in nonbypassable charges. Generally, nonbypassable charges represent the obligations of all the utility’s customers, regardless of the amount of electricity the utility supplies to any given customer. As such, all utility customers pay the charges (this includes customers of electrical corporations served by other load-serving entities (LSEs) such as Community Choice Aggregators (CCA).

Transmission access charges (TAC). TAC are those rates recovered under a FERC approved tariff by the CAISO on each megawatt hour of load and exports in order to recover transmission revenue requirements from participating LSEs within the CAISO balancing authority. These LSEs include investor-owned utilities, CCAs, electric service providers, some publicly owned utilities, and other entities, including the Bay Area Rapid Transit System (BART). In 2015, CAISO launched an initiative to consider options of potential modifications to the TAC structure. In 2018, CAISO proposed changes to the TAC that consisted in a hybrid approach that would utilize both peak demand and volumetric measurements of customer use to assess TAC charges. The CAISO stated that preserving a volumetric approach preserved cost-causation principle. However, the proposal also acknowledged that a volumetric-only approach is indifferent to when consumption occurs, which may not accurately reflect cost-causation, and the benefits users of the transmission receive from the transmission system. Many stakeholders weighed in on the proceeding, with mixed perspectives about the proposed changes, depending on how the proposal would affect their transmission rates. Ultimately, CAISO declined to proceed, perhaps due to other priorities for the entity, including expansion of the day-ahead market. Since then, there have been attempts to reconsider changes to the TAC which the CAISO has declined. Earlier this month, the Department of Water Resources, along with the State Water Contractors and other parties, submitted a request to the CAISO to once again reconsider the approach to changes to the TAC.

Proposed Law:

This bill would enact two main policies intended to encourage electrification of large industrial process heat by authorizing changes in utility costs. Specifically, it would:

1. Make several findings and declarations about the need to reduce GHGs, including from industrial sources, while minimizing leakage of industries leaving the state.
2. Authorize the CPUC to direct an electrical corporation with more than 100,000 service connections in California, when billing an industrial customer for separately metered new load to provide industrial process heat, to apply an adjustment factor to the per kWh rate so as to limit the nonbypassable charge ratio, as specified, in furtherance of facilitating electrification of industrial energy use.
3. Establish as a policy of the state that allocation of costs to ratepayers for transmission and distribution resources should follow cost causation principles.
4. Require the CPUC, on or before January 1, 2028, to request the Independent System Operator to reconsider issues raised in its transmission access charge structure enhancements proceeding as potential reforms to its high-voltage transmission access charges.
5. Require the CPUC to develop recommendations for changes to high voltage TAC that would improve consistency with the CPUC’s causation principles, to communicate the recommendations to the CAISO, and to request the CAISO to reopen its TAC structure enhancements proceeding to consider reforms to its high-voltage TAC.

Related Legislation:

AB 1280 (Garcia, Chapter 395, Statutes of 2025) added a new category of climate catalyst projects, thermal energy storage, to the list of those the Infrastructure and Economic Development Bank (IBank) is authorized to provide financial assistance in connection with, in consultation with the CEC and the CARB and according to specified requirements.

AB 2109 (Carrillo, Chapter 700, Statutes of 2024) prohibited some non-bypassable or departing load surcharges on electricity utility bills of industrial customers from applying to a reduction in electricity usage due to an industrial customer’s application of industrial heat recovery technology meeting specified requirements.

AB 2083 (Berman) of 2024, would have required the CEC to assess the potential for achieving an 85% reduction below 1990 levels in emissions from industrial heat application processes by January 1, 2045. The bill was held by the Senate Appropriations Committee.

SB 993 (Becker) of 2024, would have required the CPUC to consider establishing a new tariff to encourage new grid-responsive electricity consumption for electrolytic hydrogen production and electrifying industrial heat processes. The bill was held by the Senate Appropriations Committee.

SB 1018 (Becker) of 2024, would have exempted certain entities selling solar and wind electrical generation from the definition of an “electrical corporation” if those entities provide electric generation solely over private lines exclusively for electrolytic hydrogen production and electrifying industrial heat processes.

AB 841 (Berman) of 2023, would have required CEC to create a roadmap for electrifying industrial processes, including processes requiring heat, as specified. The bill was held by the Senate Appropriations Committee.

AB 209 (Committee on Budget, Chapter 251, Statutes of 2021) implemented, via the 2021 Budget Act, and required the CEC to establish the INDIGO program to provide incentives for projects at industrial facilities that provide significant benefits to the electrical grid, reduce emissions, and achieve the state’s energy goals.

SB 596 (Becker, Chapter 246, Statutes of 2021) required CARB to develop a comprehensive strategy for the state's cement sector to achieve net-zero GHG emissions no later than December 31, 2045.

Staff Comments:

This bill would authorize, but not require, the CPUC to direct electrical corporations to adjust the ratio of nonbypassable charges collected from new electric industrial heat process load, and would provide the CPUC with the authority to make changes, including suggesting an adjustment that would result in up to 25% of the nonbypassable charges that would otherwise be collected from this load. Adjustments to nonbypassable charges would necessarily result in less collection for those programs funded through these charges, including public purpose programs and the Wildfire Fund. However, the proponents contend this is electric load that would likely otherwise not come online due to the cost difference between fossil fuel (largely natural gas) and electricity to operate industrial manufacturing processes. They suggest this additional electric load reduces overall costs for customers, including for nonbypassable charges collected, particularly as this bill requires the marginal cost of providing service to be covered. Importantly, this bill provides the CPUC with discretion to adjust this amount

-- END --

SENATE COMMITTEE ON ENERGY, UTILITIES AND COMMUNICATIONS

Senator Benjamin Allen, Chair

2025 - 2026 Regular

Bill No: Hearing Date: 3/17/2026

SUBJECT:

DIGEST: This bill proposes two main policies to encourage electrification of industrial process heat which would otherwise use fossil fuels by authorizing changes in utility costs, specifically: (1) reconsideration of changes to transmission access charges (TAC); and (2) adjustments to nonbypassable charges for new load that electrifies industrial process heat.

ANALYSIS:

Existing law:

1. Establishes the U.S. Federal Energy Regulatory Commission (FERC) has exclusive jurisdiction over the transmission of electric energy in interstate commerce. Establishes the process and procedures for establishing transmission of electric energy in interstate commerce by public utilities, i.e., the rates, terms, and conditions of interstate electric transmission by public utilities, including requiring all rates and charges to be just and reasonable. (Federal Power Act §§§201, 205, 206 (16 USC 824, 824d, 824e)
2. Establishes and vests the California Public Utilities Commission (CPUC) with regulatory authority over public utilities, including electrical corporations. (Article XII of the California Constitution)
3. Requires the California Air Resources Board (CARB) to adopt a statewide greenhouse gas (GHG) emissions limit equivalent to 1990 levels by 2020, to ensure that statewide GHG emissions are reduced to at least 40% below the 2020 statewide limit no later than December 31, 2030, and to adopt rules and regulations to achieve maximum technologically feasible and cost-effective GHG emission reductions. Declares the policy of the state to achieve net zero GHG emissions as soon as possible, but no later than 2045, and to achieve and maintain net negative GHG emissions thereafter. (Health and Safety Code §38500 et seq.)
4. Establishes the California Independent System Operator (CAISO) governing board with five members appointed for three-year terms by the Governor and subject to confirmation by the Senate. Requires the CAISO to ensure efficient use and reliable operation of the transmission grid consistent with achievement of planning and operating reserve criteria no less stringent than those established by the Western Electricity Coordinating Council (WECC) and the North American Electric Reliability Corporation (NERC). (Public Utilities Code §§337 and 345)
5. Requires the CAISO, as a nonprofit, public benefit corporation, to conduct its operations consistent with applicable state and federal laws and consistent with the interests of the people of the state. Requires the CAISO to manage the transmission grid and related energy markets in a manner that is consistent with: making the most efficient use of available energy resources, reducing overall economic cost to the state’s consumers, applicable state law to protect the public’s health and the environment, maximizing availability of existing electric generation resources necessary to meet the needs of the state’s electricity consumers, conducting internal operations in a manner that minimizes cost impact on ratepayers, and communicating with all balancing area authorities in California to support electrical reliability. (Public Utilities Code §345.5)
6. Requires all charges demanded or received by any public utility, or by any two or more public utilities, for any product or commodity furnished or to be furnished or any service rendered or to be rendered shall be just and reasonable. Every unjust or unreasonable charge demanded or received for such product or commodity or service is unlawful. (Public Utilities Code §451)
7. Prohibits nonbypassable or departing load surcharges, as defined by the CPUC, from applying to a reduction in kilowatt-hours (kWh)of electricity that an electrical corporation customer consumes from the electrical grid in a metered interval due to industrial process heat recovery technology, up to a cap established by the CPUC. (Public Utilities Code §451.7)
8. Requires the CEC to establish the Industrial Decarbonization and Improvement of Grid Operations program to provide incentives for projects at industrial facilities that help achieve specified goals. (Public Resources Code §25662 et seq.)

This bill:

1. Makes several findings and declarations about the need to reduce GHGs, including from industrial sources, while minimizing leakage of industries leaving the state.
2. Authorizes the CPUC to direct an electrical corporation with more than 100,000 service connections in California, when billing an industrial customer for separately metered new load to provide industrial process heat, to apply an adjustment factor to the per kWh rate so as to limit the nonbypassable charge ratio, as specified, in furtherance of facilitating electrification of industrial energy use.
3. Establishes as a policy of the state that allocation of costs to ratepayers for transmission and distribution resources should follow cost causation principles.
4. Requires the CPUC, on or before January 1, 2028, to develop recommendations for changes to high voltage TAC that would improve consistency with the CPUC’s causation principles, to communicate the recommendations to the CAISO, and to request the CAISO to reopen its TAC structure enhancements proceeding to consider reforms to its high-voltage TAC.

Background

Industrial sector. California’s industrial sector includes a diverse range of facilities, including: cement plants, refineries, glass manufacturers, oil and gas producers, paper manufacturers, mining operations, metal processors, and food processors. According to the California Energy Commission’s (CEC) 2023 Integrated Energy Policy Report, combustion of fossil gas, other gaseous fossil fuels, and solid fossil fuels provide energy to meet three broad industry needs: electricity, steam, and process heat. According to the CARB’s 2022 Scoping Plan, industrial processes account for roughly 23% of statewide emissions of GHG in 2020 and are the second-largest contributor of GHG emissions in the state, behind transportation. Refineries and hydrogen production represent the largest sources in the industrial sector. Cement production accounts for about two percent of in-state GHG emissions, more than half of those emissions are related to cement production processes and less than half are from fuel and electricity consumption.^[1]

Industrial process heat. Industrial process heat is defined as heat energy (thermal energy) used for preparation or treatment of materials that produce manufactured goods. Process heat is reportedly the most significant source of energy use and GHGs in the industrial sector, accounting for about 50% of all onsite energy use and 30% of GHG emissions, according to the 2018 Manufacturing Energy and Carbon Footprint analysis. According to the U.S. Department of Energy’s Office of Energy Efficiency and Renewable Energy (DOE OEERE), process heating systems are emission-intensive because fossil fuel combustion provides 95% of industrial heat across the manufacturing sector.

Electrification of industrial process heat. Electrification and solar thermal heat are best suited to industrial processes that have relatively low heat requirements, such as food processors, paper mills, and industries that use low-pressure steam in their processes. Approaches could include replacing fossil gas boilers with electric boilers, process heaters with industrial electric heat pumps, steel forging furnaces with induction heaters, and implementing other sector-specific processes.

Under current rate structures for industrial electricity and fossil gas in California, most projects to electrify a fossil gas-powered industrial process will face operating cost barriers and potential reliability concerns. There are fewer commercially available and economically viable electrification options to

replace industrial processes that require higher-temperature heat. For these processes, onsite combustion may continue to be needed, and decarbonization will require fuel substitutions to hydrogen or other low-carbon fuels. Fuel substitution and continued combustion will require monitoring and mitigation of any potential air quality impacts, especially in low-income and communities of color which already face disproportionate air pollution burdens. Industries in California with high heat needs include steel forging, glass manufacturing, and industries with calcination processes, such as manufacturing lime and cement.

Nonbypassable charges. The CPUC authorizes the electric utilities under its ratemaking jurisdiction to recover many of their costs through surcharges on each unit of electricity used by their customers. The CPUC, and in some cases statute, makes many of these charges nonbypassable, which means a customer must continue to pay the surcharges on each unit of electricity the customer consumes. Nonbypassable charges are assessed on a per kWh of usage basis, as such, customers who use large amounts of electricity pay more in nonbypassable charges. Generally, nonbypassable charges represent the obligations of all the utility’s customers, regardless of the amount of electricity the utility supplies to any given customer. As such, all utility customers pay the charges (this includes customers of electrical corporations served by other load-serving entities (LSEs) such as Community Choice Aggregators (CCA)).

Examples of nonbypassable surcharges. Nonbypassable charges are mandated volumetric customer surcharges assessed on each kWh of electricity used by the customer in order to help fund a variety of purposes and programs. For example, these charges fund public purpose programs (such as low-income rate assistance, energy efficiency procurement, biomass procurement mandates, and research and development). Other nonbypassable surcharges have been authorized to address specific purposes, including stranded investments during the electricity deregulation of the late 1990s, procurement costs incurred by the Department of Water Resources on behalf of electrical corporation customers during the Electricity Crisis of 2000-2001, and to fulfill ratepayers’ portion of payments into the Wildfire Fund to settle claims related to certain wildfires. Additional charges assessed by electric utilities are not considered nonbypassable charges, and may be assessed depending on the customer tariff, such as demand charges, standby, and other charges.

Transmission access charges (TAC). TAC are those rates recovered under a FERC approved tariff by the CAISO on each megawatt hour of load and exports in order to recover transmission revenue requirements from participating LSEs within the CAISO balancing authority. These LSEs include investor-owned utilities, CCAs, electric service providers, some publicly owned utilities, and other entities, including the Bay Area Rapid Transit System (BART). In 2015, CAISO launched an initiative to consider options of potential modifications to the TAC structure. In 2018, CAISO proposed changes to the TAC that consisted in a hybrid approach that would utilize both peak demand and volumetric measurements of customer use to assess TAC charges. The CAISO stated that preserving a volumetric approach preserved cost-causation principle. However, the proposal also acknowledged that a volumetric-only approach is indifferent to when consumption occurs, which may not accurately reflect cost-causation, and the benefits users of the transmission receive from the transmission system. Many stakeholders weighed in on the proceeding, with mixed perspectives about the proposed changes, depending on how the proposal would affect their transmission rates. Ultimately, CAISO declined to proceed, perhaps due to other priorities for the entity, including expansion of the day-ahead market. Since then, there have been attempts to reconsider changes to the TAC which the CAISO has declined. Earlier this month, the Department of Water Resources, along with the State Water Contractors and other parties, submitted a request to the CAISO to once again reconsider the approach to changes to the TAC.

Comments

Need for the bill. According to the author:

SB 943 will help industrial firms reduce air pollution and greenhouse gas emissions cost-effectively, keeping business and jobs in the state, while also reducing electricity rates for all utility customers – just by adopting some reforms to the way electricity is priced at off-peak times when California has abundant clean electricity. …there are 2 other charges that will prevent off-peak electricity from being cheap enough for industrial firms to shift to electricity for the heat they need to run their factories. That is what this bill addresses. First, transmission charges on the CAISO grid are the same at all times, rather than higher during peaks hours and lower off-peak, as is done almost everywhere else in the country. SB 943 requires the PUC to work with CAISO to reform transmission charges to encourage off-peak usage. Second, nonbypassable charges – similar to a sales tax on electricity to pay for public purpose programs – is also set as a flat rate. For most customers it is about 10-15% of the cost of electricity, but it could be more than 100% of the cost of off-peak electricity under dynamic rates. SB 943 authorizes the PUC to cap nonbypassable charges at 25% of the cost of electricity – just for new demand for industrial heat -- so that these extra costs don’t double rates and prevent off-peak electricity from being cost-effective. Finally, because this is new electricity demand, every dollar paid, above the marginal cost of service, is new money to help pay for the fixed costs of the grid, which will lower rates for everyone else.

Electrification of industrial heat processes. Manufacturing processes are often large volume users who plan for every unit of fuel. Efforts to shift industrial heat processes to electricity are often challenged due to the comparative costs of the fuel needed in the manufacturing processes, often a comparison of the price of natural gas vs. electricity. With growing electricity rates in recent years, particularly driven by investments in wildfire mitigation by electrical corporations, among other factors, the higher cost of electricity compared to natural gas makes it unattractive to manufacturers to make this transition. Currently, the CPUC has been implementing dynamic, time-varying rates that better reflect real time prices on the grid. The CPUC is also requiring electrical corporations to incorporate cost-causation principles, including limiting certain charges to only recover those that are customer-specific non-peak distribution costs caused by the customer. This bill proposes extending these efforts to other charges in order to further attract industrial manufacturing processes from fossil fuels to electricity, specifically: transmission charges overseen by CAISO and nonbypassable charges collected from all distribution customers.

Requiring CPUC to request changes to the TAC. This bill requires the CPUC to make recommendations to CAISO about changes to the TAC to improve consistency with cost causation principles. The cost causation principle is a utility rate-making principle that generally holds that the users responsible for causing specific costs should bear those costs. The principle is intended to eliminate cross-subsidies among customers. Cost causation is one of several rate-making principles that inform utility ratemaking, including by the CPUC and FERC. Other principles include that rates should be based on the marginal cost (or the additional expense to produce one extra unit of service), rates should encourage economically efficient use of energy and reduction of GHGs, rates should improve system reliability, and others. The author’s and proponents’ desire to recommend cost causation principle to TAC is intended to better reflect transmission system usage by the loads’ peak demand, to encourage more efficient use of the transmission system. Peak demand is often a driving cost of the transmission system buildout. Additionally, this bill requires the CPUC to request CAISO reopen a 2018 proceeding mentioned above regarding structure enhancements for TAC that proposed a hybrid approach that utilized both peak demand and volumetric usage to assess TAC. Stakeholders have varying perspectives on the 2018 proposal given some may benefit and some may be disadvantaged from the approach. However, as of now, no stakeholder has expressed opposition to this request in this bill. Publicly owned utilities would prefer clearer language that the venue for any potential changes would be at the CAISO, not at the CPUC, as they are not subject to its economic regulation given their local governing boards oversee their rates. In this regard, the author and committee may wish to amend this bill to further clarify the venue for any decision on changes to the TAC are at the CAISO, where non-CPUC regulated entities, such as publicly owned utilities, engage on these issues. Additionally, the amendments would recast the request of the CPUC for CAISO to reconsider the changes to the TAC, not reopen the previous proceeding.

Adjustments to nonbypassable charges. This bill authorizes, but does not require, the CPUC to direct electrical corporations to adjust the ratio of nonbypassable charges collected from new electric industrial heat process load. This bill provides the CPUC with the authority to make changes, including suggesting an adjustment that would result in up to 25% of the nonbypassable charges that would otherwise be collected from this load. Adjustments to nonbypassable charges would necessarily result in less collection for those programs funded through these charges, including public purpose programs and the Wildfire Fund. However, the proponents contend this is electric load that would likely otherwise not come online due to the cost difference between fossil fuel (largely natural gas) and electricity to operate industrial manufacturing processes. They suggest this additional electric load reduces overall costs for customers, including for nonbypassable charges collected, particularly as this bill requires the marginal cost of providing service to be covered. Importantly, this bill provides the CPUC with discretion to adjust this amount to any amount determined to be just and reasonable, thereby not limiting the adjustment to a specific amount in the statute. Importantly, there may be additional adjustments needed in the statute to allow for these changes as some nonbypassable charges are included in the statutes. Whereas generally differing collection of nonbypassable charges among electric customers are often disputed by stakeholders, the discretion afforded to the CPUC in this bill to ensure just and reasonable nonbypassable charges are still collected from this new load is possibly a reason stakeholders have not opposed this bill.

Additional clarifying amendments. The author and committee may wish to amend this bill to clarify the new load is for “large” commercial and industrial customers that transition fossil-based heat processes to electrification.

Prior/Related Legislation

AB 1280 (Garcia, Chapter 395, Statutes of 2025) added a new category of climate catalyst projects, thermal energy storage, to the list of those the Infrastructure and Economic Development Bank (IBank) is authorized to provide financial assistance in connection with, in consultation with the CEC and the CARB and according to specified requirements.

AB 2109 (Carrillo, Chapter 700, Statutes of 2024) prohibited some non-bypassable or departing load surcharges on electricity utility bills of industrial customers from applying to a reduction in electricity usage due to an industrial customer’s application of industrial heat recovery technology meeting specified requirements.

AB 2083 (Berman) of 2024, would have required the CEC to assess the potential for achieving an 85% reduction below 1990 levels in emissions from industrial heat application processes by January 1, 2045. The bill was held by the Senate Appropriations Committee.

SB 993 (Becker) of 2024, would have required the CPUC to consider establishing a new tariff to encourage new grid-responsive electricity consumption for electrolytic hydrogen production and electrifying industrial heat processes. The bill was held by the Senate Appropriations Committee.

SB 1018 (Becker) of 2024, would have exempted certain entities selling solar and wind electrical generation from the definition of an “electrical corporation” if those entities provide electric generation solely over private lines exclusively for electrolytic hydrogen production and electrifying industrial heat processes.

AB 841 (Berman) of 2023, would have required CEC to create a roadmap for electrifying industrial processes, including processes requiring heat, as specified. The bill was held by the Senate Appropriations Committee.

AB 209 (Committee on Budget, Chapter 251, Statutes of 2021) implemented, via the 2021 Budget Act, and required the CEC to establish the INDIGO program to provide incentives for projects at industrial facilities that provide significant benefits to the electrical grid, reduce emissions, and achieve the state’s energy goals.

SB 596 (Becker, Chapter 246, Statutes of 2021) required CARB to develop a comprehensive strategy for the state's cement sector to achieve net-zero GHG emissions no later than December 31, 2045.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: Yes

SUPPORT:

350 Humboldt
Amy's Kitchen
Antora Energy, Inc.
Asian Pacific Environmental Network
California Large Energy Consumers Association
Center for Community Action & Environmental Justice
Clean Coalition
CleanEarth4Kids.Org
Climate Action California
Climate Action Campaign
Fresnans Against Fracking
Industrious Labs
Menlo Spark
Natural Resources Defense Council
Net-Zero California
Project 2030
Project Green Home
Redeemer Community Partnership
Renewable Thermal Collaborative
Rondo Energy, Inc.
Santa Cruz Climate Action Network
Sierra Club California
Sierra Nevada Brewing Company
Silicon Valley Youth Climate Action
St. George Spirits
State Water Contractors
Sunflower Alliance

The 2025 Initiative at UC Santa Barbara

The Climate Reality Project: Orange County

OPPOSITION:

None received

ARGUMENTS IN SUPPORT: A coalition of manufacturers with operations in California, including Sierra Nevada Brewing Company, Amy’s Kitchen, Antorra Energy, Rondo Energy, and St. George Spirits, states:

With technologies like thermal storage and industrial heat pumps are commercially available today to modernize our facilities with clean heat technologies, the current industrial electricity rate structure stands in the way. Unfortunately, the CPUC is statutorily limited from making changes to how these charges [TAC and NBCs] are assessed. …SB 943 gives the CPUC the authority it needs to make that possible, unlocking a real path off fossil fuels for California manufacturers while keeping jobs in California.

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1. https://ww2.arb.ca.gov/ghg-inventory-data ↑